Minister Chinsinga urges banks to start providing municipal bonds to councils
Concerned with the slow progress at which councils are initiating and implementing infrastructure projects, the Minister of Local Government Professor Blessings Chinsinga has appealed to the banks to consider providing municipal bonds in order to facilitate accelerated infrastructure development in councils.
Chinsinga said councils are currently failing to undertake capital projects such as building schools, health facilities and improving roads due to lack of financial resources; hence, the need for the intervention of the banking sector.
The minister made the remarks in Lilongwe on Wednesday evening during a the networking dinner Standard Bank of Malawi organized for Chief Executive Officers (CEOs) and District Commissioners (DCs).
“Local governments require extra sources of funding to meet growing demands for urbanization, respond to environmental and natural resource crises and implementation of different projects. There are many ways that banks could help to meet such short and medium term demands for funding. In other countries, banks support the issuance of municipal bonds, or invest directly in infrastructure which is then leased to local governments and do collect revenue directly. It is my hope that Standard Bank can consider these funding modalities,” said Chinsinga.
The minister hailed the bank for investing in digital capabilities and acquisition of omnipresent transactional platforms such as UNAYO to respond to customer needs.
Chinsinga said UNAYO platform is deepening financial inclusion for people in rural and remote areas.
“With the decentralization of government financing, which places my Ministry at the fulcrum of managing finances at the district level, we have been looking for a cost-effective and secure way of transacting like this one. We note that both UNAYO and Business Online substitute the brick-and-mortar requirement for rural areas. :The digital platforms will help reach hitherto unbanked masses. My ministry will explore how we can best make use of UNAYO, especially in terms of facilitating payment of honoraria to Chiefs, especially those in the hard to reach area,” he narrated.
In his remarks, Standard Bank Chief Executive Officer, Phillip Madinga, said the bank is committed to playing its role in finding common solutions for the country’s socio-economic problems.
Madinga stated that the bank is therefore keen to strengthen its relationship with the government, its various departments, and organs as part of our strategy to promote and make private and public partnership work for the benefit of the people.
“The bank is keen to engage with you our esteemed guests purposefully and directly as a key stakeholder in achieving mutually beneficial goals. Standard Bank has had a strong relationship with key the DC’s, which has unfortunately been eroded over time due to unreconciled queries, shifting dynamics in the payments and banking landscape and generally low engagement levels between the bank and the DC’s office across the country,” he said.
Ma theory a ku chanco awa. At what interest rate would these bonds be? Do they generate any revenue as to be able to redeem the bonds, with interest? Such schemes work in countries where interest rates are low (below 2%) and where local governments collect taxes and retain the funds. For instance in USA when you sleep in a hotel the price includes a state tax and a local tax. These are revenues that prop up the local governments. Also what’s the risk rating of these council to give bank any appetite? The private sector is the best judge… Read more »
Banks should start providing municipal bonds? How??? Kapena this is in the context that you want banks to take the underwriting role? Whichever way, let ma council wo issue the bonds. Ma bank, just like any other interested party will purchase the bonds; risk ili poti whether people will have confidence kuti akagula bond ya city, ndalama zawo zizabwelera.
Just be careful on the projects that required raising bonds for. They must be projects that have a sustainable revenue line that can sustain itself and be able to pay back.